Scully, Thompson Wrestle with Medicare Payments

Thomas Scully, administrator of the Centers for Medicare and Medicaid Services (CMS), told members of the House Energy and Commerce Subcommittee on Health the Bush administration will help Congress revise the formula used to set reimbursement rates for physicians who treat Medicare beneficiaries.

Scully warned lawmakers any reimbursement increases will have to be balanced by decreased payments to other providers, keeping the overall plan budget-neutral. The Medicare program reduced physician reimbursement rates by 5.4 percent in January this year under a formula approved by Congress in 1997.

“I know it will not be easy” to find additional funds for physicians, Scully said at the hearing. But, according to Scully, the situation “is not as dire” as physician groups and many lawmakers have said. “The system is working largely as designed,” Scully told CongressDaily. “Overall spending on physician care under Medicare is still rising,” he added, because the volume of services provided is increasing.

Scully also said the Medicare Payment Advisory Commission’s (MedPAC) proposal to do away with the current Medicare provider reimbursement formula would “produce payments that are unnecessarily high,” adding Congress may “want to opt for a shorter-term fix.”

MedPAC criticized the reimbursement formula as “flawed” because it does not take into account increases in health care costs. The group recommended a new formula that would increase payments to physicians by 2.5 percent next year.

Provider Concerns

Also speaking at the House hearing, Ted Lewers, an American Medical Association trustee, said doctors have begun reducing the number of Medicare beneficiaries they treat in part as a result of reduced reimbursements.

Lewers said Medicare should not change reimbursements for doctors just because the economy as a whole has changed. “There is no relationship between GDP and disease. The medical needs of Medicare beneficiaries do not wane when the country falls into recession,” Lewers testified.

He told the committee funds for a reimbursement increase were not included in President George W. Bush’s fiscal year 2003 budget proposal because the administration “had to make some tough choices.”

Noting Congress is expected to review Medicare payments for doctors, Thompson said, “It’s important if we look at prospective payments for (physicians) that we look at prospective payments for all [health care] providers.”

Lawmakers Are Concerned

The Associated Press (AP) reports lawmakers expressed concern the reduction in Medicare reimbursements to physicians will hurt seniors as physicians become reluctant to take on Medicare beneficiaries, a trend already recognized in many states.

Rep. Sherrod Brown (D-Ohio) told the AP, “We have a responsibility to the beneficiaries who depend on Medicare and to the health care professionals who make the program work to stop the 2002 cut in its tracks. It’s going to be expensive but it’s got to be done.”

Rep. Charlie Norwood (R-Georgia), a dentist, told CongressDaily, “Providers are simply going to walk away from Medicare. They can’t continue to treat patients if it costs them money.”
House and Senate lawmakers have proposed legislation to restore Medicare reimbursements for doctors, estimating the cost at around $1.2 billion, according to congressional officials.

Home Health Concerns

In a statement from the National Association for Home Care (NAHC), a trade group representing the home health care industry, Scully is accused of “misstating” the economic health of the industry. The home health care industry faces a scheduled 15 percent cut in Medicare reimbursements in October.

For the record, Scully said, “Home health spending went up 40 percent” in FY 2002. But according to the NAHC, more than one-third of that increase resulted from a shift from a 30-day billing cycle to a 60-day billing cycle, making fiscal year 2001 payments appear “artificially low.”
In addition, NAHC said portions of the increase were due to a “temporary payment boost” to rural areas and “modest recovery” from cuts necessitated by the 1997 Balanced Budget Act. The statement concluded, “The bottom line is that home care cannot withstand additional cuts of any magnitude.”